02929cam a22003377 4500001000700000003000500007005001700012006001900029007001500048008004100063100001800104245011700122260006600239300005700305490004200362500001500404520144400419530006001863538007201923538003601995588002502031690008502056690008602141690013002227700001802357700002202375710004202397830007702439856003802516856003702554w18172NBER20200607022829.0m o d cr cnu||||||||200607s2012 mau fo 000 0 eng d1 aAutor, David.10aMoral Hazard and Claims Deterrence in Private Disability Insurance /cDavid Autor, Mark Duggan, Jonathan Gruber. aCambridge, Mass.bNational Bureau of Economic Researchc2012. a1 online resource:billustrations (black and white);1 aNBER working paper seriesvno. w18172 aJune 2012.3 aWe provide a detailed analysis of the incidence, duration and determinants of claims made on private Long Term Disability (LTD) policies using a database of approximately 10,000 policies and 1 million workers from a major LTD insurer. We document that LTD claims rates are much lower than claims rates on the public analogue to LTD, the Social Security Disability Insurance program, yet LTD policies have a much higher return-to-work rate among initial claimants. Nevertheless, our analysis indicates that the impact of moral hazard on LTD claims is substantial. Using within firm, over time variation in plan parameters, we find that a higher replacement rate and a shorter waiting time to benefits receipt--also known as the Elimination Period or EP--significantly increase the likelihood that workers claim LTD. About sixty percent of the effect of a longer EP is due to censoring of shorter claims, while the remainder is due to deterrence: workers facing a longer EP are less likely to claim benefits for impairments that would lead to a only a brief period of LTD receipt. This deterrence effect is equally large among high and low-income workers, suggesting that moral hazard rather than liquidity underlies the behavioral response. Consistent with this interpretation, the response of LTD claims to plan parameters is driven primarily by the behavior of the healthiest disabled, those who would return to work after receiving LTD. aHardcopy version available to institutional subscribers aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.0 aPrint version record 7aH55 - Social Security and Public Pensions2Journal of Economic Literature class. 7aI13 - Health Insurance, Public and Private2Journal of Economic Literature class. 7aJ32 - Nonwage Labor Costs and Benefits • Retirement Plans • Private Pensions2Journal of Economic Literature class.1 aDuggan, Mark.1 aGruber, Jonathan.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w18172.40uhttp://www.nber.org/papers/w1817240uhttp://dx.doi.org/10.3386/w18172